Question
PART 1 INFORMATION One of your closest friends is an inventor and an entrepreneur who wants to start a business selling new, break-through office items:
PART 1 INFORMATION One of your closest friends is an inventor and an entrepreneur who wants to start a business selling new, break-through office items: a new office chair that is more comfortable than any before it, and an office table that is the most functional on the market. The table even has padding that is made of the same materials as the cushions of the chairs to provide extra arm comfort. Your friend wants to start the business by opening a factory to produce the chairs and tables which can then be sold to either wholesalers or retailers who will then sell them to the general public. After searching all over creation for the right sized building in the perfect location to properly meet the needs of his target customers, he found that the ideal building in which to put up the factory was right here in Petersburg all along. To build the chairs and tables, a machine was purchased and workers were hired. Part of the manufacturing process for both products is automated, and part of the manufacturing process for both products is done by hand. The number of each product to be produced is as follows: Yearly Number Of Chairs To Be Produced 107,000 Yearly Number Of Tables To Be Produced 82,000 It is determined that to produce each product, the following materials are needed: Per Chair Per Table Square Feet of Wood 28 130 Square Feet of Fabric 7 15 Square Feet of Foam 10 10 Materials can be purchased for the following amounts: Wood Fabric Foam Purchase Price Per Square Foot $0.24 $0.44 $0.09 It takes the following amounts of time to produce each product. Workers who produce each product are also paid the following hourly wage: Chair Table Minutes To Produce Each Product 25 35 Worker Hourly Wage $15.00 $18.00 It has been determined that the production process for both chairs and tables involves the following activities with their related activity drivers: Production Activities Activity Driver Type Machine Setups Number of Setups Variable Materials Moves Number of Material Moves Variable Machining Machine Hours Variable Quality Control Hours of Analysis Fixed Inspections Number of Inspections Fixed It has been determined that each activity will require the following amounts of money and each product will consume the following amounts of each activity driver: Activity Drivers Total Dollars Of Each Activity Chairs Tables Machine Setups: Number of Setups $53,000 68 45 Materials Moves: Number of Material Moves $37,000 40 54 Machining: Machine Hours $54,000 15,400 22,800 Quality Control: Hours of Analysis $74,000 11,100 12,300 Inspections: Number of Inspections $73,000 600 880 Using what you read in the Information section, please determine the following. Make sure that your answers explain how you performed your calculations: 1) Direct Materials Cost per Chair and Table Answer: Explanation: 2) Direct Labor Cost per Chair and Table Answer: Explanation: 3) Factory Overhead Cost per Chair and Table Answer: Explanation: 4) Total Cost Per Chair and Table Answer: Explanation: 5) Variable Cost per Chairs and Table Answer: Explanation: 6) Fixed Cost per Chair and Table Answer: Explanation:
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